If you want to have financial stability for years to come, you need to budget well.
Creating a budget is the best way to ensure that you and your family are able to live a consistent and happy life. You’ll be able to save more money and plan for a brighter future. Without one, you’re always going to be susceptible to surprise expenses, you’ll spend more, and potentially go into debt.
There’s no denying the benefits of budgeting, but it’s easier said than done. In this post, we’re going to give you a financial guide to help you budget better in 6 easy steps. Follow along and put more money in your bank account.
1. Find Your Household Net Income
Before you can make a budget, you need to have a firm idea of how much money is coming in. To get your household net income, you take what you and your spouse make per year and take away all of the fixed expenses and deductions, like taxes, social security, 401(k), rent, mortgage, bills, and anything else that comes straight off of your paycheque.
This can be a bit more difficult if you’ve got irregular payments coming in. If this is the case, then figure out an average monthly income number instead.
2. Start Tracking Your Spending
Organization is the hallmark of any successful budget, so start tracking and categorizing your spending habits. This helps you to identify where you’re spending the most money and where it’s possible to cut back.
You’ve already tracked your fixed expenses, so focus on things like groceries, eating out, gas, entertainment. In addition to future expenses, take a look at bank and credit card statements over the last few months and get a sense of where your money has been going.
3. Set Some Goals
With all of this information in mind, you can start to come up with some goals for your budget. What are you trying to save money to do exactly? It might be things like college for your kids, a new house, a car, debt reduction, or a big move to a new city.
You can break your goals into short and long-term ones, then prioritize them by level of importance and figure out how much each is going to set you back. It’s always best to try and focus on long-term goal at a time, while sprinkling in some short-term ones along the way.
4. Make the Budget
Having your income and expenses accurately mapped out will tell you how much spending money you have each month. Now you can decide on a budgeting method for your household. There are many to have a look at, but here are a few of the most popular examples:
- 50/30/20: Use 50% of your income for needs and obligations (food, gas, etc.), 30% for your wants (goals), and 20% to pay down debt.
- Envelope System: Categorize your spending, then divide your income in each category. When you’ve spent the allocated amount on a specific category, you have to wait until the next to spend on it again.
- Zero-based Budgeting: Allocate every penny of your income to an expense, savings, or debt payments; this helps people take control and avoid impulse buys.
Using a Financial Guide to Build Wealth
Following a financial guide like this one can help you build wealth for the future. Budgeting is so important to achieving your financial goals, but also to avoiding financial emergencies and helping to maintain financial stability over long periods of time.
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